Costs associated with backordering a product are called ____ costs.
A)Holding
B)Shortage
C)Ordering
D)Setup

Question

Quizplus · Accepted Answer

Backordering a product means that the demand for the product has exceeded the current inventory levels, resulting in a shortage. Therefore, the costs associated with backordering are shortage costs. Choice A, holding costs, refers to the costs of storing inventory, while ordering costs (choice C) refer to the costs associated with placing and processing orders. Setup costs (choice D) are associated with preparing machinery or equipment for production.

Costs Associated with Backordering a Product Are Called ____ Costs